Now Hear This!!
Australia’s farmers agree. Coles and Woolies need to be reigned in. I was chatting with John Morrison on ABC Radio this week and my description of the ultimate result of government policy settings fired up the farming community. So grab a coffee, a cup of tea, a beer or a glass of pinot and settle in.
This is one issue that affects all Australians and their wallets.
This interview was broadcast 12 February 2012. Listen here.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
xiao fang xu
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Hi Roger and team.
In my opinion all problems that you mentioned, and that all western countries have, can be traced to a few immoral laws.
Fractional reserve banking
Fiat money
Income tax
– If there is no free trade, armies will eventually follow.
-I would not like to live in France, the country is broke and tax is around 50%, unemployment is 9.3%.
-Central planning in China will eventually lead to a social unrest and maybe revolution. Central planning does not work, example: USSR.
-If monopoly is not good ( I agree ) how come we have RBA- central bank and government education, both are monopolies.
– Regarding capitalism I’m posting some writing by much smarter people than me. Where it say US you can put Australia or any other western country, the system is similar.
– capital – Wealth in the form of money or property, used or accumulated by a person, partnership, or corporation.
Laissez Faire Capitalism
-“Laissez Faire” is French for “leave alone” which means that the government leaves the people alone regarding all economic activities. It is the separation of economy and state.
-“Capitalism” is An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.
-Capitalism is a social system based on the principle of individual rights.
-what most people mean by “capitalism” is this free-market system that currently prevails in the western world. In short, the term “capitalism” as generally used conceals an assumption that the prevailing system is a free market. And since the prevailing system is in fact one of government favoritism toward business, the ordinary use of the term carries with it the assumption that the free market is government favoritism toward business.
-Ludwig von Mises, who wrote: In the capitalistic society, men become rich … by serving consumers in large numbers…. The capitalistic market economy is a democracy in which every penny constitutes a vote. The wealth of the successful businessman is the result of a consumer plebiscite. Wealth, once acquired, can be preserved only by those who keep on earning it anew by satisfying the wishes of consumers. The capitalistic social order, therefore, is an economic democracy in the strictest sense of the word. In the last analysis, all decisions are dependent on the will of the people as consumers
-markets are more democratic than political so-called democracy
-People cannot be free in a society in which the government has the power to levy taxes on income.
-What should be the role of government in a free society?
-By limiting the role of government to its traditionally legitimate functions of police, defense, and courts,
-Herein lies the key to a free, prosperous, and harmonious society.
-Capitalism should not be condemned, since we haven’t had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It’s not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military-industrial complex, and a foreign policy controlled by corporate interests and overseas investments. Add to this centralized federal mismanagement of farming, education, medicine, insurance, banking and welfare. This is not capitalism!
-To condemn free-market capitalism because of anything going on today makes no sense. There is no evidence that capitalism exists today. We are deeply involved in an interventionist-planned economy that allows major benefits to accrue to the politically connected of both political spectrums. One may condemn the fraud and the current system, but it must be called by its proper names — Keynesian inflationism, interventionism, and corporatism.
-We cannot depend on government to restore trust to the markets; only trustworthy people can do that.
-Markets regulate better than governments can.
-Capitalism didn’t give us this crisis of confidence now existing in the corporate world. The lack of free markets and sound money did.
-It was the greedy free market, supposedly, that created both the housing bubble and the housing bust and led, inevitably, to the “great recession.” Capitalism, according to most liberal pundits (and even Alan Greenspan in a bad mood), is an inherently risky and unstable system that requires government regulation to correct its flaws and moderate its excesses.
-Let me dissent sharply from that conventional wisdom and argue that what talking heads are calling “capitalism” is actually “crony capitalism” and that it is crony capitalism that is responsible for most of our current economic difficulties.
-A genuine capitalist economy assumes that each adult individual and business is free to buy and sell anything that they own and then keep the rewards (or suffer the losses) of enterprise. The only legitimate role for government (the political system) is to protect property rights, that is, to enforce contracts and prohibit theft and fraud.
-Laissez-faire capitalism is a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force.
-Under laissez-faire capitalism, the state consists essentially just of a police force, law courts, and a national defense establishment, which deter and combat those who initiate the use of physical force. And nothing more.
-There are presently fifteen federal cabinet departments, nine of which exist for the very purpose of respectively interfering with housing, transportation, healthcare, education, energy, mining, agriculture, labor, and commerce, and virtually all of which nowadays routinely ride roughshod over one or more important aspects of the economic freedom of the individual. Under laissez faire capitalism, eleven of the fifteen cabinet departments would cease to exist and only the departments of justice, defense, state, and treasury would remain. Within those departments, moreover, further reductions would be made, such as the abolition of the IRS in the Treasury Department and the Antitrust Division in the Department of Justice.
-The economic interference of today’s cabinet departments is reinforced and amplified by more than one hundred federal agencies and commissions, the most well-known of which include, besides the IRS, the FRB and FDIC, the FBI and CIA, the EPA, FDA, SEC, CFTC, NLRB, FTC, FCC, FERC, FEMA, FAA, CAA, INS, OHSA, CPSC, NHTSA, EEOC, BATF, DEA, NIH, and NASA. Under laissez-faire capitalism, all such agencies and commissions would be done away with, with the exception of the FBI, which would be reduced to the legitimate functions of counterespionage and combating crimes against person or property that take place across state lines.
-the Federal Register contained fully seventy-three thousand pages of detailed government regulations. This is an increase of more than ten thousand pages since 1978
-Under laissez-faire capitalism, there would be no Federal Register.
-the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state than to laissez-faire capitalism. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez-faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.
-Government Intervention is Responsible for the Crisis
Andrew Legget
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Nice post Roger, you put across some really good points and god knows the commercial networks on TV are not really going to touch it. Newspapers to an extent as well.
This is a big collection of multiple problems all working together to end up in the current situation. I will add my thoughts as though i am looking at it from an investing and company analysis point of view.
The governments are pricers, not value or fundamental investors. They have free reign for at least 3-4 years with minimal disclosure before an AGM is called and then receive their big incentive payment. There is one KPI for politicians and this is to be part of the government so do and say whatever it takes to meet that objective. All their incentives are short term and are focused on maximising sentiment rather than really doing anything to maximise long term value of the country they are in.
What happens in a company that has similar aspects, they will go on expensive acquisitions, pay dividends they don’t have, buy back stock at an expensive price and then can say “look at the share price, shareholders have never had it so good”. In short, they want to maximise share price, not maximise value.
From the consumer point of view, we want it all and are demanding. We are the shareholders of the government organisation and we want the share price to be at record highs every day, we want our dividends (tax refunds/breaks) to be at maximum level, whilst we also want the government to re-invest for future growth but not take on any debt. It is an impossible task as we can’t pay more money out as dividends whilst spending more without taking on finance. We end up cementing the short term game of governments as we will make our decisions about how we feel now rather than how we think we will be in the future as a result. There for another reason why we can’t blame the governments for their lack of long term vision as on a whole the majority of voters don’t either.
Without wanting to get into a political debate as their are other forums on this, the key to winning an election i feel is for the ALP to convince people that things are going really well and the Coalition to convince people that things are not going very well at all as we vote on perception and our perceptions of the parties. High spending ALP versus the conservative and tight coalition even though there is little difference between the two.
The consumers also want everything at the lowest price but want our companies to take the hit and look after aussie products as we will not pay more money than we need to. Companies are obviously profit motivated so this isn’t going to happen. The home brand items will cause some more expensive products to go to the wall and then due to less competition the prices will rise. This is obvious.
The farmers and other aussie manufacturers being hit by this, have the issue due to them not having very strong brand equity and Australias issue of only really making commodity products and those that aren’t we usually sell off. I have written on here before my thoughts about customer purchasing when it comes to needs vs wants. We pay premiums for wants but want to pay as little as possible for our needs. Like i have said, you don’t see any home brand items in the confectionary aisle.
It is a hard problem to solve as it is such an entrenched behaviour on all levels. I want to see some more aussie companies try to make products that are great and have that brand equity. We have the brains trust but i think the financing side is where a big problem is. We are a very risk averse country and we could have someone who has the next iPhone, Facebook, cochlear implant etc ready to go but just can’t get the money. This means it will either not be made or it will benefit a country that does.
Roger Montgomery
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Thanks for taking the time again to share your thoughts Andrew!
Domenico Fotea
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Seriously Rodger if we don’t get politicians with some nuts (male or female)
all this talk is just adding to climate change I reckon ( f….. hot air).
The vast majority of people or families will always buy on price, simple as that.
We need to have politicians that look after the big picture for Australia and us rather than short term gain (or themselves). That’s why we employ them is it not? Having said that we got no hope of seeing that at the moment.
You have the right ideas for much needed changes, always have, maybe always will, but like I said just hot air mate.
Paul Dean
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Great listen and great shame that people are somehow only just waking up to this now. The bottom line is Australia has allowed the short term interests in every conceivable area overtake the long term interests and health of its people and the nation as a whole and when the government aids and abets it through willful negligence (focusing only getting re-elected) then it becomes a never win situation. That’s why I packed my bags and left. I could see the writing on the wall years ago and got sick and tired of pushing the proverbial uphill in a constant battle against monopolies, price gouging and red-tape. Sad but true and there is no end in sight. Keep up the good work Roger helping raise awareness of these issues.